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Sifiso Skenjana: An economist's take on the three biggest parties' plans for growth

The DA proposed the introduction of a new labour act that,
as per their suggestion, will make hiring and firing easier for business, which
they argue is positive for employment growth and productivity.

In his paper, Cambridge University researcher Simon
Deakin finds that "worker protective labour regulation generates net
positive outcomes for economic growth and development", echoing findings
by the World Bank in their 2016 Doing Business Report which argued that "under-regulation
in the areas of working time and minimum wage protection have harmful effects
on productivity and exacerbate the effects of macroeconomic shocks" .

The previous research suggested that employment regulations
are unquestionably necessary as they allow for more efficient contracting
between employers and workers.

Simply, this means that that the apparently rigid labour
regulation in South Africa is conducive for economic growth and for the
effective protection of the often-vulnerable low earning labour force.

Proposed competition legislation
for SOE monopolies

The DA proposed revision in the competition legislation to
ensure more competitive markets in the sectors that the country’s SOEs operate.

The sectors in which the SOEs in question operate are
Energy, Airlines, Rail Transport, Military and Defence, Telecoms,
Petrochemicals and Forestry.

However, the highest sector concentrations are in the
intermediate industrial products, Food and Agro-processing, ICT and Transport.

Industry concentration research from the Competition
Commission finds that in these sectors, the percentage of firms with market
shares of 45% or more (quasi monopolies) are 24%, 21%, 9% and 9% respectively.

The focus, therefore, should be aimed at making these
sectors materially more competitive before focusing on the competitive
structures of SOEs.

The EFF proposes to increase tax collections by 20% in an
attempt to boost the fiscal the strength of the economy. They propose this
despite the recent numbers that have come out showing a budget deficit of R232bn
as opposed to the expected R224bn as a result of lower tax collections and a
weak economic environment.

In addition, corporate
income tax accounted for 18.1% of total tax revenue, with personal income tax
accounting for 38.1% and VAT accounted for 24%.

If the EFF proposed to reduce VAT back down to 14% as well
increase overall tax collection by 20%, it is difficult to see how they could
achieve this without straining an already strained economy.

Proposed subsidisation
of 4IR investors

The EFF proposes to subsidise companies whose investment is
focused on fourth industrial revolution technologies; at the same time their
manifestos anchors on jobs first.

These proposals could effectively be at odds, given that
roughly two thirds of the South African labour force is either unskilled or
semi-skilled labour.

In the same vein, 4IR technologies will most likely demand a
semi-skilled and skilled labour force, meaning that such technologies may
require skills importing if the economy is to utilise them to their highest
productive capacity.

Such skills importing is materially opposing the jobs
proposal of the EFF manifesto.

The ANC manifesto proposed a revival including mining
beneficiation, clothing and textiles, pharmaceutical and agriculture.

However, a revival particularly of previously buoyant
sectors needs a sober reflection on what led to the failures and loss of
competitiveness of those sectors. Such a sober reflection will ensure an
effectual revival programme that ensures past mistakes are not repeated.

South Africa does not need protectionism, but rather
economic nationalism. The difference is that the latter focuses on investing
and building the competitiveness on local industry as opposed to putting in place
measures (often import tariffs) that will curtail demand for foreign goods.

The difference between protectionism and economic
nationalism is a fine yet very important one.

Inclusive Economy
Proposals

The ANC manifesto proposes to transform the economy to serve
all people – in simple terms, a more inclusive economy.

Globally, countries like Iceland, German, Sweden, to name a
few, have provided sufficient case studies to the ruling party to reflect on
how to respond with urgency to the need of a transformed and inclusive economy.

The countries in question, for example, have legislated both
for a reduction of the gender pay gap and gender representation in all spheres
of the economy.

The ANC, as a ruling party, has shown little urgency in the
material and effectual transformation of the economy to be inclusive and
representative.

Final reflections

In an ideal setting,one could combine the manifesto
proposals into a one white paper that looks to effectively bootstrap the
economy out of the current low growth trap.

Each manifesto seems to have interesting contributions,
albeit often soft, untested and unsubstantiated.

An economy that can absorb its labour force has everyone’s
best interests at heart, yet we still find ourselves with little consensus on
how to achieve this. When parliament reopens, it will be a fresh opportunity
for the opposition parties to keep the ruling party honest about its promises,
as well as how it proposes to fulfil these promises.

In the meantime, we will all soon breathe a some fresh air
when we see the back of election season, and everyone can get back to working
towards a more prosperous and inclusive economy.